Upside Down Mortgage

Archive for October, 2008

Loan Modification Benefits

Question: Bankruptcy an option?

I'm physically unable to work, V.A. turned my benefits claim down. Filed for S.S. ( probably take years) Loan modification is under way but can"t show a good enough income. I've no family, I'm only 47, worked hard my whole life till my back went out. Lived here 20 yrs. I'm in dire straits and don't know what else to do Pls suggest any options..Thks

Answer: First post is pretty correct....To file a bankruptcy, you need money to pay the retainer upfront. In order to keep the home, you either have to be current on the loan to file a chapter 7 bankruptcy, or be working to keep it in a chapter 13 filing. If you have no income coming in at all, a bankruptcy filing will discharge your debts, but you have to pay to file first. You can review bankruptcy information at www.usbankruptcy.gov Great site with excellent information on filing for each chapter and what is required. You can consult with a bankruptcy attorney in your area, most will see you free the first consultation. They will require some information from you such as your income in the past 6 months if any, list of your debts, assets, and taxes for either the last 3 or 4 years. Once they review, they can tell you what you qualify for. If you choose to file and let the house go, after a bankruptcy filing, any apartments would be hard to get if they check credit, same for any job dealing with money. Insurance rates will increase, and any loans in the future will start out at a very high interest rate. Check the website I provided and that may get you started in the right direction. Good Luck!

Loan Modification benefits - Loan Modification Tulsa & Nationwide

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Subprime Servicers

Subprime lending has recently caused over 56 lenders to either go out of business or stop issuing subprime loans because of excessive foreclosure rates. The lending community made decisions in the last few years that dramatically eased a borrower's qualifications with a resultant dramatic increase in foreclosures.

The housing demand was so strong that lenders started to compete for the insatiable mortgage demand by making qualifying very easy. One example was the creation of the "stated income" loan, or the "liar's loan". In the loan application, the borrower only had to "state" his income without showing any proof of that that income. Unfortunately about 60% of borrowers over-stated their income on their loan applications to qualify for their loans. A review of lending practices showed racial disparities in African-American and Hispanic low-income neighborhoods which had 1 ½ times as many subprime loans at higher interest rates and closing costs as compared to low-income white neighborhoods.

The lenders planned to compensate for higher default rates by charging higher interest rates and closing costs. But to make payments as low as possible for the borrowers, lenders developed low-initial interest rate loans (teaser rates) or negative amortization (Neg Am) mortgages. With a Neg Am loan, a borrower would actually owe more than he originally borrowed when he went to sell.

The teaser rates combined with adjustable interest rates caused borrowers to be hit with huge mortgage payment increases. Most borrowers couldn't afford huge monthly payment increases and foreclosure rates began to rise. Lenders gave the loans on the assumption that the homeowner would do whatever necessary to make the payments, or the lender would get the property back in foreclosure and re-sell it for a profit in “hot real estate" markets.

Overlooked by lenders was the fact that real estate investors had become a major factor in the real estate market that had previously been dominated by the “retail buyers" or single family homeowners. The actual statistics went from investors owning about 2% of all single family homes in 1990 to almost 28% in 2006. This huge increase in investor ownership caused the "tail to wag the dog" and sent the real estate market into price advances that exceeded historical stock market gains.

Lenders were not discouraged, and to make loans even more affordable, developed 100% financing loans designed to eliminate "PMI" or Principal Mortgage Insurance by using an 80% first and a 20% second mortgage. This 80/20 program was so successful that it became the standard loan for most new homeowners for an 18 month period in 2003 – 2005. Now the borrower had two mortgages, the first at a traditional interest depending on the borrower's credit rating and a second mortgage with a higher interest rate of 3% to 5% above the first mortgage rate.

We are now seeing huge default rates among 80/20 financings because the borrowers saw an opportunity to refinance their properties, cash out an equity profit without having to sell their homes, and just walk away without making any mortgage payments.

Who are the losers? Unfortunately, anyone with an adjustable rate mortgage who can't convert it to a fixed rate, investors who own mortgaged properties, new homeowners with challenged credit or minimal down payments, the support personnel for the real estate industry, including realtors®, construction personnel, construction support industries, mortgage brokers and their staffs, lenders and their staffs, attorneys who specialize in real estate law, appraisers, surveyors, home inspection personnel, and just about anyone in a support industry related to real estate.

There are solutions, but barring governmental intervention, the average homeowner needs to focus his financial future on getting a fixed rate mortgage; trimming his expenses where possible; taking advantage of his property tax exemptions for homestead, military service, or senior discounts; be proactive in selling his home and slow to replace it with another home; stay away from "funny money" loans that could escalate sharply; and save cash for a larger down-payment to reduce his interest rate and monthly payments. As bleak as the future appears for many economists, the financial markets have weathered worse financial storms. I suspect the final solution will take years and need the banking industry to become more pro-active is the resolution of the individual homeowner's financial problem. An alternative solution involves the lending institutions developing a strategy of better handling of the re-sale of the bank owner properties by offering them directly to new homeowners by a national bidding system, involving all the lenders.

About the Author:

David Dinkel has over 30 years experience in real estate investing which has given him a unique perspective into the real estate market. He has created a powerful Free CD entitled “How to Sell Your Home in as Little as 72 Hours” designed to help homeowners sell their houses quickly and save thousands of dollars. It includes secrets that realtors won’t tell you and investors don’t want you to know. The Free CD is available at http://www.FSBOPowerSellingSystem.com.

Article Source: ArticlesBase.com - The Real Casualties of Subprime Lending

Takin' Care of (sub-prime) Business

Securitization Subprime Loans

The White House has recently unveiled a plan to help mitigate the wave of foreclosures that have recently swept the US as reports continue to predict that an even greater number (some estimate as much as 2 million) of Americans are likely to default within the next year.

This plan involves the major US lending companies making an agreement to freeze the relatively low "teaser" interest rates that many Adjustable Rate Mortages are set up with, instead of allowing them to reset at their regular time, usually two years from the loan's issue.

These subprime loans have an artificially low introductory rate of between 7 and 9 or more after the grace period, which many real estate owners have been unable to cope with in recent months, sending shockwaves through global markets as investors in mortage-backed securites have been spooked. As their loans have defaulted, the bonds that have been repackaged and sold have become basically worthless.

Bush's talks with mortage companies have been concerned with solving both aspects of this problem by extending the introductory rates to a select cross-section of subprime borrowers, thus preserving some of the cashflow supposedly guaranteed to those investors who believed the AAA bond rating for the securities into which these mortages have been sold off. Since the cost of a forclosure is often over $50,000, the investors have little choice if they want to salvage any of their investment.

However, the standards used to judge which borrowers qualify for the rate freeze have been left (some say intentionally) vague. They have stated that those who are already in danger of default will be given no assistance, as well as those who can afford to pay their mortages at the increased rates. What is unclear is how the lenders will determine who is able to pay.

Those who fall into the middle bracket, or who are likely to default at some point if rates increase but who are able to make their payments now, are the targeted borrowers for the freeze, which is proported to last from two to five years past the date at which the rate would normally reset. Therefore, some foreclosures are still guaranteed, but the specter of falling property values, which threaten to send the entire US economy into a tailspin, will hopefully be offset somewhat.

Many economists have recognized the mortage-related woes as a necessary reassessment of the American economy. In combination with the falling dollar, recent developments in this crisis make it clear that the housing market of the US has artificially inflated for years, which would have to be corrected somehow anyway. And, while this scenario is relatively unpleasant, the US has had unsustainably high levels of consumer spending, coupled with the lowest percentage of consumer saving in three decades.

These statistics point towards a reckless tendancy of many Americans to spend because the economy will always grow. While this assumption has helped industrialize the world through American spending, it may do harm in the long run. With any luck, the real estate landing will be softened and Americans will be more apt to work with their lenders. If not, it may just encourage more recklessness by the government's taking responsibility for the market's woes. Only time will tell.

About the Author:

If you are looking for a property in the Austin real estate market Escapesomewhere can help you in your search. If you want to search your Austin home search online you can use their site to search the Austin MLS. They also have a page describing the Austin Condos coming up in downtown Austin.

Article Source: ArticlesBase.com - The Impending Subprime Interest Rate Freeze

Take Advantage of the Subprime Crisis: Portfolio Lenders